Versailles chiefs charged with fraud over £600m collapse

Carl Cushnie, the former chairman and chief executive of Versailles, the failed finance group, and Fred Clough, his finance director, were yesterday charged with fraudulent trading.

Mr Cushnie was once hailed as Britain's most successful black businessman. His company, Versailles, which provided bridging loans, collapsed at the end of 1999 after a £100m discrepancy was discovered in its accounts.

The Serious Fraud Office said yesterday that he and Mr Clough "surrendered" at Charing Cross police station, in London, and they were then charged.

In a surprising twist, the SFO added that Lorraine Jones, formerly Mr Clough's personal assistant, was charged with "aiding and abetting" fraudulent trading.

The trio were released on bail and will appear before Bow Street Magistrates Court on Friday.

Warrants were not issued for their arrest. They received letters inviting them to attend the police station.

Trading in Versailles shares was suspended on 8 December 1999, after discrepancies were found in its accounts. The SFO launched its investigation later that month and the company was placed in receivership.

Versailles was worth over £600m at the time the shares stopped trading, having been a stock market star on the back of what was seen as a spectacular financial record.

Mr Cushnie has always maintained that he knew nothing about any wrongdoing at the company and has helped the authorities with their investigation since Versailles failed.

It is alleged that, between 28 February 1992 and 21 January 2000, Mr Clough and Mr Cushnie were "knowingly parties to the carrying on of the business of a company, namely Versailles Group, with intent to defraud creditors".

Mr Cushnie and Mr Clough had been long-term business partners and had run a previous company together.

The receivers to Versailles, PricewaterhouseCoopers, had issued a writ last year against Clough, alleging "breach of fiduciary duty, deceit and conspiracy to defraud".

After Versailles collapsed, it emerged that, as well as regular bank loans, the company had relied on an unknown group of individuals who had provided it with additional funding.

PwC found that of the £100m debtor book - the group's main asset – about £69m represented a series of circular "cross-firing" payments between companies in the group that artificially inflated the total.

Versailles' business was based on loans to small companies, secured against their future revenue, insured by Versailles itself and recycled as debts due from larger, more creditworthy companies.

It was used by businesses who received orders but then did not have the financing necessary to fulfil those orders. Versailles provided a bridging loan, against orders received. Based on Versailles' stated accounts, it appeared to be very successful in establishing and developing this market.

This new approach to trading finance became popular with smaller companies that had restricted access to capital, and as reported profits and turnover rose, so did the debtor book.

It is thought that the SFO was waiting for PwC to complete its investigation before bringing charges. This took longer than expected.